Economic Sanctions: Foreign Policy Levers Or Signals?

by Joseph G. Gavin III

Joseph G. Gavin III currently serves as associate Washington representative and manager, trade policy, for the U.S. Council for International Business.

Executive Summary

It is a paradox of policymaking that economic sanctions
are so often imposed in the pursuit of U.S. foreign policy
objectives with so little apparent success. That paradox is
exemplified now by the continued reign of General Manuel
Noriega in Panama and prospectively by the probable results
of U.S. sanctions in response to the repression of protesters
in the People's Republic of China. As of April 1988 U.S.
foreign policy sanctions were in force against 27 countries,[l]
and even state and local governments have begun imposing
economic sanctions aimed at foreign policy goals.

To better understand this paradox it is useful to reexamine common perceptions of economic sanctions. The main
conclusion of this analysis is that the chief purpose of
foreign policy sanctions is to send signals and not, as is
commonly perceived, to exert economic leverage. A corollary
is that the pressures to impose foreign policy economic sanctions are likely to endure despite the paucity of tangible
results. In light of this finding it is important that policymakers recalculate the balance of likely short-term policy
gains against the harmful long-term effects of such policies
on the competitiveness of U.S. industry.

Inside the Beltway the reigning study of the effectiveness
of economic sanctions is by Gary Hufbauer and Jeffrey Schott,
who define economic sanctions as "the deliberate government-
inspired withdrawal, or threat of withdrawal, of 'customary'
trade or financial relations."[2] Such sanctions are used
as a "tool to coerce target governments into particular avenues
of response."[3] The economic leverage discussed here is
used to influence national policies or behavior that is not
normally considered economic.[4] Economic leverage may be
attempted by imposing export controls, import restrictions,
curbs on investment, reductions in foreign aid, or freezes
of financial assets. Policymakers impose such sanctions to
achieve a change in some noneconomic policy, to inflict punishment in the form of economic hardship, as a "demonstration
of resolve"[5] to express disapproval of some action, or to
achieve some combination of these objectives.